Just Give Them The Money

We're in the process of submitting a form to secure 501c3 status for GatherFor, with the help of some wonderful and supportive lawyers. One of them asked, in reading about our work, "How do you know that the people you're giving $500 to will use it appropriately?" He was referring to the fact that we give $500 to each of the people we work with at GatherFor (whom we call “Neighbors”). 

This question left me wondering what it means to use money appropriately and who gets to decide. If you’re poor and out of work, is it appropriate to buy your child a toy? How about a Playstation 5? What about green tea mochis from Whole Foods or a jumbo pack of instant soups at CVS? What about using the money to gamble in Atlantic City or buying Sour Patch Kids or getting a Disney+ account or a vacuum cleaner or an Amazon Kindle? When, if ever, do such purchases become “appropriate”? 

Questions about “spending money appropriately” don’t arise, for example, when employers pay employees. That may be because:

• employers vet employees through a hiring process 

• employers have an ongoing relationship with the employee

• the employer receives something in return for providing a salary, over which they have some control

• employees “earn” the money through labor

So, when you consider giving money to a stranger you haven’t vetted, with whom you have no relationship, for which you are receiving nothing in return, and who hasn’t “worked for it,” it  might risk feeling like a waste of your hard-earned money.    

Early Evidence Suggests People Experiencing Poverty Use Cash Wisely

The reason that we give Neighbors $500 in cash assistance for them to use however they need is that we believe that no one is better positioned than they are to make wise choices for their well-being. This hypothesis has been tested increasingly by organizations like GiveDirectly, the UN World Food Programme, The Family Independence Initiative, FreeFrom, Humanity Forward, The $1K Project (an incredible partner of ours who has helped many of our Neighbors secure $3,000 in critical financial assistance), and Foundations For Social Change’s New Leaf Project, who set up a randomized control trial in Canada to provide people experiencing homelessness with $7,500. They found: 

The people who received cash transfers moved into stable housing faster and saved enough money to maintain financial security over the year of follow-up. They decreased spending on drugs, tobacco, and alcohol by 39 percent on average, and increased spending on food, clothes, and rent, according to self-reports (Vox, Oct 2020).

They also found that people experiencing poverty made wiser choices and thought longer-term when given larger amounts of money.

Apparently Indulgent Choices Might Actually Be Understandable And Wise Investments 

Yet, even with such growing evidence, many of us still find giving cash to people a peculiar practice. For example, a friend of a friend who works in investment banking believes the funds given by the government as stimulus money and pandemic unemployment assistance might be better spent investing in high-growth businesses that could provide jobs for people, citing a report detailing how recipients of these funds have spent their money. The report shared a story about one mother, who bought her kids a PlayStation 5 with her unemployment assistance. “Is this why we’re giving people money they haven’t earned?” a skeptic might ask.  

In Poor Economics, Nobel Laureates and MIT Behavioral Economists Abhijit Banarjee and Ester Duflo ran a randomized control trial in which they provided poor individuals living in India with a small windfall of cash. They observed that those who received this cash assistance purchased the same number of calories as those in the control group, but that the calories they purchased were more expensive. In other words, they bought tastier food like salt for their lentils and rice or a cup of sugary tea or coffee.

Is this behavior a form of selfish indulgence and short-term thinking? Perhaps. And some academics have offered those types of explanations. But Banarjee and Duflo hypothesize that the main reason for this behavior is that life in poverty can be crushingly boring and constantly demoralizing. So a small amount of additional funds is sometimes best deployed in acquiring a “pick-me-up.” Who among us could spend a day in hours of hard manual labor and then not hope for a tasty treat over an unappealing, but calorie-high meal? Perhaps investing in our morale is as important as investing in our economic and physical well-being.

Similarly, is an out-of-work single mother wasting government funds by buying a Playstation 5 for her kids? Or is she living in a studio apartment by herself with her children, without any access to safe childcare in the time of COVID-19, needing to spend most of the day at home supporting her kids as they participate in remote schooling? And is she needing her children to be safely occupied for a few hours each day without requiring her attention so she has the time to figure out which food pantries to visit and which flexible remote jobs she can apply for? Perhaps such a purchase is in fact a clever way to deal with a virtually impossible situation. Perhaps no one is more invested than she is in making sure that she and her family sustain the most challenging time in recent history. And perhaps no one quite knows how to allocate resources in such a way that will get her family where it needs to be. 

Community Strengthens the Effectiveness of Unconditional Cash Assistance

As The Workers’ Lab finds, pairing unconditional cash transfers with a community of peers going through the same thing makes the money even more effective. GatherFor Neighbors share resources with each other, travel to food pantries together, help advocate for one another with landlords and local government agencies, help each other with childcare, help each other use and learn technology, share strategies to help dollars go further, discuss strategies for getting more sleep in a stressful time as single parents, send daily reminders to "do your five push-ups" and improve health. Of the 25 people to whom we have provided $500 in unconditional cash assistance, only one has stopped engaging with us. The rest have continued to show up to support each other. And nearly all of them have used the funds to pay for food, phone bills, rent, medical expenses, and for internet (so their children can attend remote school). 

Being in our early days here at GatherFor, we’re continuing to learn. But for now, one of the ways we believe our Neighbors need our support is for us to just give them money. No one is going to take care of themselves and their families quite like they are.